Saudi Arabia replaces India as largest defence market for US

09 March 2015

Saudi Arabia has replaced India as the largest importer of defence equipment worldwide and took the top spot as the number one trading partner for the US in 2014, according to IHS’ annual Global Defence Trade Report.

“Growth in Saudi Arabia has been dramatic and, based on previous orders, these numbers are not going to slow down,” said Ben Moores, senior defence analyst at IHS Aerospace, Defence & Security.

Already the largest importer of weapons, Saudi Arabian imports increased by 54 per cent between 2013 and 2014 and, based on planned deliveries, imports will increase by 52 per cent to USD9.8 billion in 2015.

One out of every seven dollars spent on defence imports in 2015 will be spent by Saudi Arabia.

“When we look at the likely export addressable opportunities at a global level for the defence industry, five of the 10 leading countries are from the Middle East,” Moores said. “The Middle East is the biggest regional market and there are USD110 billion in opportunities in coming decade.”

Saudi Arabia and UAE together imported USD8.6 billion in defence systems in 2014, more than the imports of Western Europe combined. The biggest beneficiary of the strong Middle Eastern market remains the US, with USD8.4 billion worth of Middle Eastern exports in 2014, compared to USD6 billion in 2013.

The second tier of exporters to the Middle East is led by the United Kingdom with USD1.9 billion, the Russian Federation with USD1.5 billion, France with USD1.3 billion and Germany with USD1 billion.

Turning to China, in 2014 the country jumped from the world’s fifth to the third largest defence importer.

“China continues to require military aerospace assistance from Russia and its total defence procurement budget will continue to rise very quickly,” said Paul Burton, Director of Defence Industry & Budgets at IHS Aerospace, Defence & Security.

IHS forecasts that fast-emerging exporter South Korea will become a regional leader in the coming decade. Some USD35 billion in new contracts will come online within the next decade and the South Korean defence industry is forecast to win $6 billion in new business within East Asia. South Korea looks set to be the rising star of the Asia Pacific defence industry.

Russia exported USD10 billion in 2014, an increase of 9 per cent from 2013. China was the largest recipient of equipment (USD2.3 billion) followed by India (USD1.7 billion), and Venezuela and Vietnam (each USD1 billion).

After years of sales growth, Russian industry exports now face challenging times. A drop off in exports is forecast for 2015 as major programs draw to a close, a trend that could be accelerated by sanctions.

Furthermore, falls in the oil price are set to have a devastating impact on some lead Russian clients who are vulnerable to low oil prices, such as Venezuela and Iran. This problem is compounded as Chinese industry becomes increasingly less dependent on Russian technology.

The report was created using the IHS Aerospace, Defence & Security Markets Forecast database, a publicly sourced global forecasting tool that tracks current and future programs from the bottom up, looking at deliveries and funds released to industry rather than budgets. The study covers production, R&D, logistic support and service revenues where there is an export.

The entire market is covered except for munitions and small arms. Anything under 57mm caliber has not been included in this study. The study only tracked programs with a primarily military function, removing homeland security and Intelligence programs. Constant US dollars are used as the study’s base. For additional information visit: www.ihs.com/jmf

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